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Earnings per share (EPS)
BUY AND HOLD YIELD INVESTMENTS STRATEGY
Earnings per share (EPS) is derived by dividing the Full Year Profit by
the number of shares on issue.
[Formula: EPS = full year
profit ÷ shares on issue]
| Objective: |
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Analysing EPS can highlight a company whose EPS growth rate is consistently
faster than their business peers (i.e. other companies that provide the same
goods and/or services). You are looking to see if the company has grown the
profit for each listed share faster than similar companies. Analysts use
forecasted rather than historic EPS to determine future prospects.
You can access peer analysis and forecasted EPS from the
Reuters website - this site covers all stock markets and most shares
traded through Direct Broking. You can view the Estimates page
and the Ratios page for your chosen stock(s). |
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| Step 1: Find EPS
growth rate figures |
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Estimated EPS
On this page you can view the consensus opinion of stock analysts. It will show
the predicted mean, high and low of the earnings per share by each analyst.
Under “Consensus Estimates Trend” you will see how those predictions have
changed. Under “Estimates Revisions Summary” you will see how often and in
which way those predictions have been revised. Some shares have a “Historical
Surprises” summary if the analysts were unable to accurately predict the
result.
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| Step 2: Compare
against industry peers |
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Ratio Comparison
On the "Ratios" page under “Growth Rates” you
can view the 5 year historical growth rate for the EPS. You can also compare it
to industry (e.g. Integrated Telecommunications) and sector (e.g.
Telecommunications) of the relevant company to see how the company performs
compared to the peer mean.
To establish which companies you should be comparing in an industry, we
recommend that you view the
NZX Market Indices list on the Direct Broking website. |
>> Part 6. Price to Earnings Ratio
<< Part 4. Net Tangible Assets Per Share
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